Sheriff Hodgson must find new funding source to fix Shawmut Diner

DARTMOUTH — The Bristol County Sheriff’s Department will have to find a new funding source to refurbish the old Shawmut Diner for inmates to use to learn food service skills.

According to Jonathan Darling, a spokesman for Bristol County Sheriff Thomas M. Hodgson, they were eyeing forfeiture funds they expected to receive from their participation in the investigation of a pyramid scheme by James M. Merrill, 57, of Ashland.

Merrill, president of TelexFree between February 2012 and April 2014, pleaded guilty to one count of wire fraud conspiracy and eight counts of wire fraud in October 2016. He also agreed to forfeit about $140 million and other assets. He was sentenced in March in U.S. District Court, Worcester, to six years in federal prison, followed by three years of supervised release.

According to former U.S. Attorney Carmen Ortiz, Merrill defrauded thousands of victims, including some who invested their life savings into the pyramid scheme.

The Sheriff’s Department believed it was going to receive a portion of the forfeiture from the case because one of its officers, Sgt. Julio DeFigueiredo, who serves on the U.S. Homeland Security Task Force, was part of the Merrill investigative team.

“We expect that (the forfeiture money) will cover the repairs. We just don’t know when it’s coming,” Darling told The Standard-Times in an interview in October.

The diner needs a kitchen (grills, stoves, storage, kitchen equipment), a foundation, a new roof, new electrical system, a fire suppression system, bathrooms before it can be used, he said. The counter and booths are intact and the floors and blinds look the same, the seats need to be redone.

According to the U.S. Attorney’s office sentencing memorandum regarding the asset forfeitures, when the government raided TelexFree’s offices in April 2014 along with the Securities Exchange Commission it froze and seized about $140,000,000 in TelexFree’s domestic banks accounts and payment processor reserve accounts. The government also seized property and vehicles worth about $8,000,000.

On Jan. 4, the government seized about $19,000,000 in cash that “appears to be fraud proceeds from the TelexFree scheme.”

Victims have to be compensated before any forfeitures are dispersed to law enforcement agencies, according to the U.S. Attorney’s Office.

“Pending entry of a final order of forfeiture and approval from the Department of Justice pursuant to 21 U.S.C. § 853(i), the government anticipates using all of these assets to compensate victims of the fraud,” the sentencing memorandum said. “The government would distribute the forfeited assets by first transferring the funds to the Chapter 11 trustee (“Trustee”), under an agreement that the Trustee only use it to compensate victims.

“Beyond the Trustee’s claims process, however, restitution may be impractical,” the sentencing memo said. “After disbursement of the assets seized by the government, literally hundreds of thousands – perhaps more than a million – victims will still be uncompensated.

“In theory, after whatever sentence Merrill serves, the Clerk’s Office could collect a monthly amount from him for further distributions but, relatively speaking, the amounts would be minuscule and it would be impossible to make distributions on a pro rata basis. As to Merrill’s assets, they have already been seized and counted in the total amount currently available for compensation,” the memo said.

Darling, contacted for comment by The Standard-Times on Friday, was caught off-guard by the development.

“We haven’t heard it wasn’t coming. This is absolutely a surprise. We’ll check it out and get back to you,” he said.

He also said that the Sheriff’s Department was expecting a large sum of money from the case.

The old Shawmut Diner, owned by Phil and Celeste Paleologos, closed March 31, 2014, and was moved to the Bristol County Sheriff’s property at the House of Correction on Faunce Corner Road, Dartmouth, between May 2 and May 6, 2014.

Never miss a story

Choose the plan that's right for you.
Digital access or digital and print delivery.